LCRA Board approves new water rates

Continuing severe drought impacts rates for raw water

June 18, 2014

The LCRA Board of Directors on Wednesday approved a new one-year "drought rate" for firm water customers for 2015.

Firm customers, including many cities in Central Texas, will pay the new rate of $175 per acre-foot beginning with the January 2015 billing cycle. The current rate is $151 per acre-foot. (One acre-foot is just under 326,000 gallons.)

The new firm customer rate also will apply to domestic use customers who draw water directly from the Highland Lakes.

The Board also approved new rates for interruptible customers in the Garwood Irrigation Division. Beginning this year, Garwood customers will pay an effective diversion rate of $39.37 per acre-foot, a 20 percent increase.

The Board decided not to set new rates for the Gulf Coast and Lakeside irrigation divisions until water is available for them. Interruptible customers such as Gulf Coast and Lakeside have not received water from the Highland Lakes in 2012, 2013 and 2014 because of the severe drought. Customers in the Garwood division have been receiving a limited amount of water from the Highland Lakes during this drought because of provisions in the contract in which LCRA purchased the Garwood water rights.

"This drought has had a tremendous impact on every aspect of LCRA’s water operations," LCRA General Manager Phil Wilson said. "The drought rate is necessary to cover our costs during this drought because we are selling less water now. We are in the same situation many of our customers and other water utilities are in, and that’s having fixed costs that don’t change, even though you are selling less water. When the drought breaks and water supplies are greater, those costs will be spread over a larger customer base."

Firm customers are mainly cities and industries, but also include residential property owners who pump water directly from the Highland Lakes for domestic use. Firm customers pay a premium for water that is guaranteed to be available even during a repeat of conditions seen in the worst drought in the region's history, the 10-year drought from 1947 to 1957.

The new firm customer drought rate is similar to new drought fees recently imposed by many water providers and utilities. The rate helps LCRA cover fixed costs associated with the water system that are present even during droughts, when less revenue is coming in because less water is being sold. If the drought breaks before the irrigation season in 2015 and LCRA is able to provide water from the lakes for irrigated agriculture, LCRA expects to reduce firm rates. The drought rate fully recovers river management costs and fixed costs of water delivery for agriculture, but does not include the cost of developing a new downstream reservoir or groundwater supplies in Bastrop County.

The new firm rate is $175 per acre-foot for water used, $87.50 per acre-foot for water reserved but not used, and $350 an acre-foot for water used above a customer’s contracted amount.

The Board also approved changing the way water rates are calculated for the Garwood division. In 2014, LCRA will continue to use the current rate structure that considers acreage irrigated and acre-feet diverted. Beginning in 2015, Garwood customers will pay the same effective rate, but the rate will be based on volume of water diverted. The $39.37 per acre-foot rate reflects full recovery of costs allowed under the contract between LCRA and the Garwood Irrigation Company.

LCRA is exploring outsourcing the maintenance and operation of its irrigation delivery systems, which could save an estimated $6 million a year. If successful, LCRA intends to use the savings to reduce the firm water rate.

LCRA staff presented an initial rate proposal to the LCRA Board in January. Staff members then spent months collecting feedback from customers and the public throughout the basin. LCRA staff revised the rate proposal partly as a result of that information-gathering process.

The LCRA Board will consider 2016 rates for firm customers in 2015, after taking into consideration whether maintenance and operation of the irrigation delivery systems have been outsourced and the extent to which interruptible water is expected to be available for sale in 2016.